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(Photo credit: ted_major)

For shipping everything from coal to cars and intermodal freight containers packed with imported goods, railroads are in high demand and so are the cars that ride the steel rails. That's good news for makers of rolling stock like St. Charles, Missouri-based (ARII), which competes in the car business against FreightCar America (RAIL), Greenbrier (GBX) and Trinity Industries (TRN).

American Railcar posted better than expected second quarter earnings on July 24, even as revenues fell short of forecasts. Earnings of $1.11 per share were $0.29 higher than the consensus estimate of $0.82. Revenues of $159.4 million were up 3.4% versus the second quarter of 2012, but shy of forecasts for $170.46 million.

The leasing and railcar services businesses showed strength, along with tanker car demand. Revenues of $354.5 million for the first six months of 2013 were up 5.7% from the first half of 2012. Earnings in the same period were up 64% to $41.6 million, or $1.95 per share.

American Railcar began paying a quarterly dividend of $0.03 per share in March 2006 and has never missed a payment. Last December the company jacked up the quarterly payout to $0.25, good for $1.00 a year and a yield of 2.8%.

Dividends are comfortably covered by expected earnings per share of $3.50, which are 15% higher than last year's EPS. Revenue for the full year is expected to rise 3.6% to $737.3 million. For that kind of growth, a price-earnings multiple just above 10 seems rather modest.

The bullish case is helped by looking at where American Railcar trades relative to valuations in the recent past. Its price-to-sales ratio of 1.04 is at a 12% discount to the three-year average of 1.17. As a multiple of earnings, its presently at a whopping 59% discount to its five-year average P/E ratio of 24. Climb aboard American Railcar.